The hedge fund billionaire Steve Cohen has told investors he will have "zero tolerance for wrongdoing" as his firm continues to be "buffeted" by insider dealing charges.

In a letter to investors, Cohen gave his frankest assessment to date of the investigations into his investment business. "Like you, we have been buffeted for many months by news of SAC employees who have pleaded guilty to, or have been accused of, insider trading," Cohen wrote. "We have endured speculation that somehow this conduct is acceptable to the firm, its senior management and to me. It is not, nor has it ever been."

The letter comes amid a major crackdown on insider trading by US authorities. The biggest case so far has been against employees and corporate contacts of Galleon Group. That case has led to 77 prosecutions so far and the jailing of senior executives.

According to the letter, first reported by Bloomberg News, SAC will "claw back" deferred compensation of employees facing criminal or civil cases. Employees who leave SAC during an investigation will have their pay withheld and will not be paid if the case leads to sanctions or other punishments.

Cohen also told investors that SAC would increase its compliance staff by 25%, to about 45 people. The hedge fund also plans to to limit contact between SAC staff and public company employees.

"Our reforms are no panacea – it is not possible to stop someone intent on breaking the law – but these reforms send an unmistakable message: we have zero tolerance for wrongdoing and if you are caught breaking the rules, it will cost you," Cohen wrote.

In March the FBI arrested Michael Steinberg, a long-time portfolio manager at SAC, over allegations of insider dealing at the firm that has been going on for seven years. Steinberg was the most prominent of several arrests that have been made at the firm.

Cohen's firm has close to $14bn under management, and during the late 1990s and early 2000s posted annual returns as high as 70%. The money has financed an epic spending spree for Cohen, who added a $155m Picasso to his art collection and a $60m Hamptons home to his properties earlier this year.

Last month, a judge approved a $602m settlement agreement between SAC and regulators over insider dealing charges. Preet Bharara, US attorney for the southern district of New York, is conducting a separate investigation into the firm.